Tweet This

Tax season opens on Monday, January 29, 2018. The Internal Revenue Service (IRS) expects to process nearly 155 million individual tax returns in 2018. Will you be filing one of those returns? And more important, do you need to?

For the 2018 tax filing season, you'll report the income and corresponding deductions for the tax year 2017. That includes pay received in 2017 but not pay that you receive in 2018 for services performed in 2017 (you'll report that income next year).

Just because you received income in 2017, however, doesn't necessarily mean that you have to file a federal income tax return. For most taxpayers, you can figure whether you have to file by checking the chart below. Choose your filing status, your age and your gross income for the year; if your gross income is above the threshold for your age and filing status, you should file a federal income tax return.

File 2018KPE

For this purpose, gross income means all income you received that isn't exempt from tax, including:

Any income from sources outside the United States;

Income from the sale of your main home even if you can exclude part or all of it from tax;

Gains, but not losses, reported on form 8949 or Schedule D; and

Business income reported on Schedule C or Schedule F (not including losses).

For purposes of figuring your age, if you were born on January 1, 1953, you are considered to be age 65 at the end of 2017.

Since you won't always have the chart at the ready, here's your quick "cheat sheet" formula: Add your personal exemption to your standard deduction (remember to consider the increased standard deduction for those over age 65). You can find the 2017 numbers that you'll use in 2018 here.

Note: Since the personal exemption was eliminated beginning in 2018 as part of tax reform, the "cheat sheet" formula will change next year but it's still good for the current tax season.

The chart applies if no other person claims you on their federal income tax return. If you can be claimed as a dependent on someone else's tax return, the rules are a little bit different. Here are some basic guidelines:

For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from dividends or interest) was more than $1,050 or if your earned income (such as from wages or salary) was more than $6,350.

For single dependents who are over 65 or blind, you generally must file a federal income tax return if your unearned income was more than $2,600 or if your earned income was over $7,900.

For single dependents who are over 65 and blind, you generally must file a federal income tax return if your unearned income was more than $4,150 or if your earned income was over $9,450.

For married dependents when either of you are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income was more than $1,050; if your earned income was over $6,350; or if your gross income was at least $5 and your spouse files a separate return and itemizes deductions.

For married dependents when either of you is over 65 or blind, you generally must file a federal income tax return if your unearned income was more than $2,300; your earned income was over $7,600; and your gross income was at least $5 and your spouse files a separate return and itemizes deductions.

For married dependents when either of you is over 65 and blind, you generally must file a federal income tax return if your unearned income was more than $3,550; your earned income was over $8,850; and your gross income was at least $5 and your spouse files a separate return and itemizes deductions.

Keep in mind that these rules apply to dependents who are also married, not just simply married taxpayers. For tax purposes, your spouse is never considered your dependent.

There may be other reasons that you may have to file a tax return. The most frequent reason for filing a federal income tax return even when you don't meet the basic income criteria is for self-employed persons: Self-employed taxpayers must file a federal income tax return if net earnings are at least $400 (this includes non-employee income reported on a form 1099-MISC).

Other reasons to file include owing special taxes like a recapture tax (such as the homebuyer's credit), alternative minimum tax (AMT), write-in taxes (including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings accounts), household employment taxes, taxes on tips you did not report to your employer or on wages from an employer who did not withhold those taxes. You also need to file if you had wages of $108.28 or more from a church or qualified church-controlled organization exempt from payroll taxes.

And, of course, you may have to file if advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Health Insurance Marketplace.

Don't forget tax-favored accounts. You may need to file a tax return if you received HSA, Archer MSA, or Medicare Advantage MSA distributions during 2017. If you took an early distribution from a qualified plan or one more than the appropriate amount from a retirement plan, like an IRA, or if you made excess contributions to your IRA or MSA, you'll need to file a return. If you didn't take your minimum required distribution (RMD) - and you were supposed to - you'll also need to file.

Even if you don’t need to file a federal income tax return this year, you may still want to take advantage of tax breaks and credits which might be available. You might also be entitled to a refund for excess withholdings or a refundable credit such as the earned income tax credit (EITC).

And, of course, the health care law complicates matters a bit. Here's what you need to know about filing a tax return and health care:

If you are not required to file a tax return in 2018, you are considered exempt from the shared responsibility payment, and you do not need to file a tax return to claim the coverage exemption.

If you are required to file a tax return in 2018, and you did not have minimum health insurance coverage for all of 2017, you will also need to file form 8965, Health Care Exemptions (downloads as a pdf). You’ll use form 8965 to claim an exemption from the shared responsibility payment or to figure the amount of the payment. (For more, click here.)

If you qualify for credits or subsidies, you must file a tax return in 2018 to reconcile the advance payments received in 2017. If you received advance payments in 2017 and fail to claim the premium tax credit on a federal tax return, this could bar you from receiving additional advance payments. That’s a fancy way of saying that if you received health care tax credits or subsidies and you want to continue to receive those health care tax credits or subsidies, you are still required to file your federal income tax returns even if you would normally be exempt. Failure to file means you will be responsible for the full cost of your health care insurance, and you may be asked to repay some or all of the 2017 advance payments of the premium tax credit.

If you're still not sure whether you need to file a tax return, ask your tax professional, give the IRS a call (1.800.829.1040), or make an appointment to visit an IRS Taxpayer Assistance Center (TAC).

Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future, I enrolled in a tax course. I loved it. I signed up for another. Before I knew...